Letter of Comment No. 156
File Reference: 13-3PV
Date Receive: 3/20/12
Jefferson County
Pinance CDepartment
David P. I!h1inser, CPA, Finance Director
320 S. Main Str••t, Room 109
J.Herson, WI 53549-1799
Phone: (920) 674-7142
Fax: (920) 674-7368
Cindy Dlestelmann
Jayne Hlntzmann
Donna Miller
Tammy WorzallB, CPA
March 16, 2012
Director of Research and Technical Activities
Governmental Accounting Standards Board
401 Merritt 7
P.O. Box 5116
Norwalk, CT 06856-5116
Subject:
Project 13-3, Preliminary Views, Economic Condition Reporting: Financial Projections
Dear Governmental Accounting Standards Board members, staff, and other interested parties:
This letter is in response to GASB's proposed Reporting of Financial Projections for Assessing Economic
Conditions of Governments.
I would like to go on record as opposing this proposed accounting regulation as presented.
I do not think that anyone disputes the value and need for governments to analyze their future financial
prospects and perform analysis/projections along the lines suggested in the Preliminary Views document.
However, such analysis should be in the context of budgets and budgetary reporting - which do not
constitute historical financial reporting. As stated on numerous occasions by GFOA and others, accounting
and accountabiltty are not interchangeable terms. A government demonstrates its accountability through
financial reports prepared using accounting principles, budgetary documents, and other reports/documents.
Accounting and financial reporting are focused on objective, historical information concerning such items as a
government's financial position, results of operations, cash flows, and compliance with financially related
legal requirements. Projections of future year projections do not present either actual or historical
information. These projections are subjective and better suited for budget documents.
The political environrnent in every unit of government can be unique unto itself. In the case of Jefferson
County (WI), our elected officials all have to run for office every two years. This gives the potential for shifts
in the political will and direction every two years. Outside factors beyond the control of local govemments
can also greatly affect local govern~. For instance, nobody could have predicted the sweeping changes
that were proposed by the Gov~or of Wisconsin in January 2011 affecting collective bargaining. As
another example, the budgetary and cash flow problems that the States of California and Illinois are
experiencing greatly affects those local government units. These political events can drastically change the
fiscal projections of a government.
I also see this issue as potentially harming the perceived integrity of governmental financial reporting.
Readers could potentially assume that the audttor supports the validity of the fiscal projections and thus hold
both management and external auditor responsible when fiscal projections turn out in hindsight to be
inaccurate.
It is not reasonable to assume that an independent audit firm could give an opinion on fiscal projections
within the audited financial statements. The opinion of an audit firm is based upon the fact that the financial
Letter of Comment No. 156
File Reference: 13-3PV
Date Receive: 3/20/12
statements accurately represent historical data. As there is too much subjectivity in preparing fiscal
projections, I do not feel that the audit firm could give their opinion on fiscal projections without appearing to
give recommendations on future policy issues, thus affecting their independence.
If you want some information about future years and sustainability in the audit document, then it could be
included in the letter of transmittal. There the govemment could discuss what the future may hold.
In summary, I reiterate my opinion that the GASB not include fiscal projections in the audited financial
statements for government units.
Sincerely,
David P. Ehlinger, CPA
Finance Director
Jefferson County, Wisconsin
WIFinance sharedlOfficelWord120121GASB Project 13-3 comments March 2012.doc
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